Fuel Economy Reaches A Record High, But Why?

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Average sales-weighted fuel economy of purchased new vehicles, Oct 2007 - Oct 2012 (via UMTRI)

Average sales-weighted fuel economy of purchased new vehicles, Oct 2007 - Oct 2012 (via UMTRI)

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The University of Michigan Transportation Research Institute has tracked fuel economy and new car sales since October 2007, and during those five years, we've seen gradual gains in efficiency. Today, UMTRI says that new vehicles sold in October reached a record-high 24.1 mpg. The question is: why?

To answer that, we probably need to go back to 1975, when Congress enacted the Corporate Average Fuel Economy regulations. CAFE was a response to the oil crisis of the 1970s, which was brought about by a range of factors, including the decline of American oil production, the Yom Kippur War, and a subsequent oil embargo instituted by a range of Arab states. Ultimately, CAFE was meant to reduce dependence on foreign oil by raising fuel efficiency standards.

CAFE's effects have been slow but steady. The regulations have boosted fuel economy from a fleet-wide average of 19.9 mpg in 1978 to 29.3 mpg in 2011. (If you'd like a year-by-year analysis, you can download this handy PDF from the National Highway Traffic Safety Administration.) Under the George W. Bush administration, a fleet-wide goal of 35 mpg was set for 2020. President Obama upped the ante, pushing new CAFE regulations that aim for 54.5 mpg by calendar year 2025, spurred in part by the hope that electric cars and highly efficient hybrids will gain traction with U.S. shoppers.

Caveat

Now would probably be a good time to mention that the record-high efficiency noted by UMTRI is based on window-sticker fuel economy, not the aforementioned CAFE ratings. 

Window-sticker fuel economy is determined by the EPA, based on real-world driving conditions. CAFE stats, on the other hand, are derived from a formula that hasn't been tweaked much since its creation in 1975. As a result, a car's CAFE rating can be 10 mpg higher -- or more -- than its real-world efficiency. 

As frustrating as that may be, the good news is that when it comes to fleet-wide fuel economy, CAFE and window-sticker ratings generally move in unison. So, while the CAFE rating for new cars sold didn't hit record levels in October, it reached a very respectable 29.3 mpg.

All of which is to say that standards for fuel economy are rising, so it's not entirely surprising to see that reflected in the efficiency of new cars sold.

The rest of the story

However, it's not as simple as that -- if it were, the UMTRI graph above would be a straight line. Gas prices in particular have a huge impact on car sales. 

Note, for example, how fuel efficiency spiked in March, when average gas prices approached the $4 mark (and soared much higher in some places). Then, when the changeover to summer blend was complete and prices fell, so did interest in fuel-efficient rides. Though UMTRI doesn't hazard any guesses, the spike in October is likely due in large part to Hurricane Isaac, which helped send gas prices skyward once more.

The high prices and instability are having a huge effect on the auto market. Sales of compacts and subcompacts are running 24.9% above last year. Two segments in decline are large SUVs -- off 9.1% compared to 2011 -- and large cars, which are down a stunning 87.9%. 

Now, that gas prices are plummeting, we expect to see interest in gas-sippers wane a bit, but it should return again in the spring.

Are you in the market for a new car? Is fuel economy your top criteria? Or is something else driving you? Sound off in the comments below.

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